Economic thoughts about “gold” open access

There is increasing support in the scholarly communications community for “flipping” the standard journal publishing model from subscription-based to “gold” open access, which is to say a system supported by pre-publication fees (article processing charges or APCs), rather than post-publication fees (subscriptions), and in which there is free (unpaid) access to the published articles.[1]

The increasing support is especially strong in Europe, as illustrated by the recent signing of the “Expression of Interest in the Large-scale Implementation of Open Access to Scholarly Journals” which came out of the Berlin 12 Open Access Conference, sponsored by the Max Planck Society. As of this writing, 44 institutions have signed on to the EoI.

A number of my colleagues in US academic research libraries have expressed skepticism or downright opposition. And recently the Advocacy and Policy Committee of the Association of Research Libraries has circulated a one-sided briefing paper in advance of a discussion during the spring ARL business meeting on 27 January. (I say “one-sided” because support of gold OA was presented, tepidly, in just nine words — “the overall aim of this initiative is highly laudable” — followed by nearly a page of single spaced “concerns and criticisms”.)

I think critics of the Expression of Interest are jumping to unfounded and incorrect conclusions, and that organizing opposition to the EoI may greatly hinder a very promising effort to radically transform the scholarly publishing ecosystem much sooner and more effectively than other efforts (notably the “green” OA movement). I’ll offer a few observations here, written from my perspective as an economist. (See Caveat below.[2]) For this article I’m going to assume that open access is a good thing overall.

I first present a summary, followed by a considerably longer statement of my arguments.

Summary

Many decision makers and influencers — particularly in the research library community in the US — are expressing opposition to gold OA for reasons that I think are unsupported by either facts or simple economic principles.

Will gold OA further strengthen the monopoly scholarly publishing firms? No. In fact, it is likely the most realistic path towards reducing or eliminating their market power.

Will there be a change in the current market model? Yes. By engaging authors in the economic decision about where to publish, we will create article-level (submission) price competition between journals and publishers.

Will research-production-intensive institutions be made worse off? No. The costs of scholarly communications (primarily subscriptions) are generally paid (mostly indirectly) by research funders today. Those total payments for scholarly communications will be less in a predominantly gold OA world. The research funders can and will redirect funds to where the costs are paid, raising reimbursements to those institutions whose costs go up (because they are paying for a disproportionate share of APCs) and reducing them to those whose costs go down (because they are saving more through the elimination of subscription payments than they are paying in APCs).

Will gold OA hurt under-resourced institutions (such as those in the “global south”)? No. First, because they generally publish less per employee than better-resourced institutions, at first blush we should if anything expect them to benefit: they’ll save more in eliminated subscription costs than they will pay in APCs. At worst, since research funders routinely adjust research direct and indirect payments as costs change, under-resourced institutions might not get to keep the savings, but they won’t be made worse off. (And any current subsidies to reduce their subscription costs can simply be re-directed to be APC subsidies.)

Will flipping to gold OA take too long and cost too much? Given our experience to date with green OA, and the fundamental problems with getting to effective, universal green OA sufficient to bring subscription prices to competitive levels, flipping to gold OA probably can happen much sooner. And though the transition may be somewhat costly, those costs will be moderated increasingly by negotiated offsets. And some transitional investment is justified by the great social benefits that will follow from open access and competitive rather than monopolistic prices for scholarly communications.

Will flipping to open access strengthen the monopolized scholarly publishing industry?

To address this let me say a few words about the market structure of the current industry. “Monopoly” generally means “a single seller”, yet there are many scholarly publishers (some for profit, some not-for profit; some with many titles, many with just one or a few titles). Nonetheless, it is reasonable, for short hand, to say that scholarly publishing is monopolized.

First, research output (e.g., articles) is what we economists call a differentiated good: one article is not a perfect — or often even good — substitute for another. If articles were perfect substitutes, then if one among several publishers, if one tried to charge an above-competitive article price (to first order, the average cost of reviewing, editing, reproducing and distributing it), readers would switch to a different provider who competed by offering a lower price, with the competition maintaining low, competitive prices — as we see for corn flakes, for example. But since articles are (often quite) imperfect substitutes, when one publisher charges above-competitive prices, readers don’t simply switch to a different article from a competing publisher. There will be some limit to how much readers (or their agents, such as libraries) will pay, but it will be well above the low incremental cost of an article.

Thus, articles that people want to read have scarcity value — you can only get them from one publisher, generally (this is why publishers care so much about obtaining and protecting copyrights). Whoever has copyright on an article that readers want to read can charge a scarcity rent (price > cost).

The market for publishing has evolved so that a small number of organizations control copyright on the most valuable articles (e.g., Elsevier, Springer, Wiley, Taylor & Francis, the American Chemical Society). They are able to charge prices well above incremental and average cost, so they are are earning above-competitive profit margins. In recent years the profit margins of the largest for-profit scholarly publishers have been around 35% or higher; a competitive, risk-adjusted profit margin is probably closer to about 10%. (See Caveat below.[2]) So, on the order of 25% of what we’re paying is not for the cost of publishing value added, but for excess (above-competitive, or monopolistic) profit.

Back to “flipping”. People concerned about the Expression of Interest or other discussions of “gold” OA almost always assert that we will simply be reinforcing, even strengthening the publishing monopoly.

I am unaware of any cogent economic argument that leads to this conclusion.

To strengthen the existing monopolists, something about the APC (article processing charge) model for paying the costs of publishing (instead of subscription) charges would need to raise the barriers to competition: that is, to give the existing firms increased market power. I don’t see anything about gold OA that does this. It may leave market power unchanged (I don’t think so; see below).

But I don’t see any way in which it increases market power. The primary sources of market power for the large monopoly publishers are three:

They have journals that have a reputation for prestige, and so authors want to submit their articles to be published in those journals, rather than in journals published by less monopolistic organizations.

They have many such journals, which they can sell in “big deal” bundles that make it very difficult for purchasers (mostly libraries) to put competitive pressure on the publishers by dropping subscriptions to their weaker journals (that is, those for which there are reasonably good substitutes).

(This is a big one, and will come back below.) The decision to commit resources to purchase a journal is for the most part made by someone different (usually a librarian) than the decision about where to submit an article for publication (made by the author). Even if authors realize in the abstract that by submitting to publishers that charge monopoly prices they are reinforcing the power those publishers have, which results in their university or research lab having to spend too much on subscriptions, we have a classic collective action problem: the decision of each individual author about where to publish does not directly affect the amount the author’s institution spends on subscriptions, but does affect his or her readership and prestige, so authors (for the most part) quite rationally ignore the monopoly power of the publishers to whom they submit.

Changing to a funding model in which (monopolistic) publishers get paid in the form of pre-publication APCs rather than post-publication subscription payments does not change the first two sources of market power in any way I can see. It may change the third source of market power, but in a way that weakens, not strengthens the monopolies. (I’ll discuss this below).

So why do librarians (and others) fear that flipping to gold OA will increase the power of the monopoly publishers? The only reason that might make sense is that they think there is an alternative path in the future — neither the current market structure, nor gold OA — that will be more competitive than either, and thus that committing to gold OA means we lose the opportunity for something better.

What might that better world be? The only model that I see actively discussed is “green OA”: a model in which the current publishing model continues, but in parallel authors submit the article to an open access repository (typically with an embargo period). Funding agencies in the US have been driving towards this model, with NIH being the most aggressive to date. As a result, most recently published biomedical articles are now made available through PubMed Central, though typically with a six to twelve month lag.

Is the green OA model going to reduce market power (more than gold OA might, see below)? I haven’t seen any research evidence to date suggesting that it has yet (green advocate Stevan Harnad agrees, “no evidence yet of … subscription cancellations … even in fields where it has already attained 100% Green OA for more than two decades”). The pressure on publisher prices would be this: if enough readers were willing to wait the six to twelve embargo months for access, enough subscribers might start cancelling their subscriptions, inducing publishers to lower prices. We’d expect to see this first and strongest among publishers of biomedical journals, since the most successful green OA effort to date is PubMed Central. I haven’t seen a slow-down in the above-inflationary rate of price increase in biomedical journals (much less a decrease in prices, towards competitive levels; see Caveat below[2]).

There are serious limitations on the green OA model, and its ability to create this hypothetical pressure on publishers to lower prices.

It needs to be adopted aggressively by government funding agencies in most or all major research producing countries, if enough content is to be available in green OA to create enough subscription-cancellation risk to force publishers to lower prices.

Author deposit compliance must be high, again, for enough content to be available. Experience to date is that voluntary author submission to OA repositories is very low, and that stands to reason: it’s an extra work-flow for them, on top of the already time-consuming and irritating journal submission process. The exception to low compliance rates is in biomedical, with the difference being that NIH (alone among US funding agencies, I believe) enforces deposit by holding up subsequent funding if an author has not deposited previously-funded research outputs into PubMed Central. But…

Even if all funding agencies (in all research-producing countries) implemented an NIH-like policy with enforcement, much scholarly output is not directly tied to extramural funding. The very strong and specific dependence of identifiable biomedical projects on specific grants makes this model work in that set of disciplines. It would be very difficult to use this compliance enforcement mechanism in many other fields where the link between grant and article is much less clear. Even more so because many scholars in social sciences and humanities (in particular) are not continuously funded, so threatening to withhold the next grant may not have much effect. Indeed, much research receives no extramural funding at all.

I’m not against green OA where it is reasonably efficient. But I think we’ve been trying it long enough now that we can see plenty of (informal) evidence that it is not going to be effective for much scholarly research.[2] And I don’t see any evidence yet that it will reduce publisher market power enough to lower prices even where it is effective.

How might gold OA reduce market power?

Gold OA doesn’t increase the power of the dominant publishers: they are already extracting profit-maximizing monopoly revenues from us, and switching to gold won’t increase the amount they extract. And articles will be available open access to everyone. So we’ll be better off than we are today in the subscription world.

But I think it is likely to be better still, given some time for participants in the market to adjust. Leap ahead some years and imagine the world in which most significant journals are published gold OA, with article pre-payments and no subscription charges. And imagine that authors are at least somewhat involved in the financial decision of where to submit their articles: that is, the submission decision has an economic effect on their research budgets. While authors will still have a strong incentive to publish in high-prestige, widely-read journals, rarely is there only a single good journal suitable for a given article. In this world, authors will have an incentive to also consider the article fee price for submitting to various good journals, and will start to exert competitive pressure on publishers to lower those prices. And it is exactly that competition which has the best — indeed, I think probably the only — chance of leading us to a new market equilibrium in which the amount we spend on scholarly publishing is reduced to the resource cost — that is, the amount it takes to actually provide the peer review management, administrative, copy-editing and marketing services that publishers provide. The obscenely high monopoly profit margins will be whittled down as journals compete to attract submissions of the best articles from the best scholars.

There are some simple and lovely reasons why competition would work in a gold OA world when it doesn’t in a subscription world. The most important is that the person deciding where to submit an article will have some reason to care about the price the publisher is charging. The second is that the first two huge market power advantages I enumerated above are both deflated when journals aren’t sold by subscription. When subscription purchasing decisions are made at the level of the journal (bundle of articles) — and increasingly the “big deal” (bundle of journals) — the only possibility for competition is between journals or bundles of journals, and as I pointed out, different articles published in different journals are not very good substitutes for each other. But in a gold OA world there is competition at the level of the article submission, and before the article is accepted for publication, multiple journals can be very good substitutes for each other (for example, an economist generally gets as much readership and prestige whether her article is published in the American Economic Review, the Journal of Political Economy, or the Quarterly Journal of Economics).

This is the key: in a gold OA world with authors bearing part of the article fee, journals and publishers compete on price, not just quality.

Authors pay? How will they afford this?

Much of the concern about gold OA seems to be about authors who are not funded by research grants to pay article fees. This is “merely” a problem of the distribution of scholarly communication funds. We — society — are paying $X billions currently to sustain the scholarly communications enterprise. Gold OA doesn’t increase the resource cost of commnications: it doesn’t require that we employ more people or more servers or more kWhs of electricity. It shifts the payments from post-publication to pre-publication, but as I argued above, gold OA doesn’t increase market power, and in fact is likely the best path to decreasing market power, and so the total amount paid to publishers should, if anything, fall. So, the problem is “merely” one of getting the money from subscription budgets into APC budgets. (I keep scare quoting “merely” because I am aware that changing administrative flows of funds will take some time, but it’s an administrative problem and can be resolved — the path through which various activities often changes.)

Right now most of the money flowing to publishers is paid by research libraries, who receive their funds from their central campus budgets. For the most part, central campuses (at least in the US) receive these funds through overhead or indirect cost payments by external research funders. This flow of funds suggests one straightforward way in which funds could be re-directed in a gold OA world (there are others). First, central campuses could reduce the budgets of libraries by the amount that we save by not having to pay for journal subscriptions. Then, the central campus could provide authors with research funds to offset that part of their APCs that are not covered by research grants.[3]

I did say that to get the benefits of article submission competition we need authors to bear a meaningful share of the cost. If campuses simply reimburse them for APCs, no matter how high they are, then authors don’t have an incentive to force publishers to compete on price. So, to get competition, campuses might offer only a fixed reimbursement, equal say to a reasonable estimate of the current resource cost (not price) of publishing an article — today around, say, $2000 — and if the author wants to publish in a journal with an above-competitive (monopolistic) APC she will have to come up with additional funds herself. (An elegant alternative that may seem less harsh to authors, suggested to me by Mark McCabe via his collaborator Mackenzie Smith, is to give authors a somewhat higher amount — say, average cost plus $1000 — per article, and let the author bank the difference between that amount and the APC in a research account.)

Is gold OA bad for research-production-intensive institutions?

Some are concerned that if the costs of scholarly communications are paid through pre-publication fees those institutions that produce relatively more publishable research will be disadvantaged because they will pay more in APCs than they will save in subscriptions. It’s almost surely true that there will be some redistribution of where the funds are flowing. However, again, this is “merely” an administrative flow of funds issue and with some time our research support systems can adjust. Most of the funds supporting the costs of scholarly communications (currently mostly subscription charges) are, ultimately, coming from government funding agencies (through indirect cost payments). As the subscription expenditures of institutions that consume (subscribe) relatively more than they produce (publish) fall, indirect cost reimbursements to those institutions will (and should) decline correspondingly. And as the publication costs of institutions that produce relatively more increase, indirect cost payments (or direct cost APC payments through grants) will (and should) increase. As long as the scholarly communications industry doesn’t cost more to support (and when competition heats up in a mostly gold OA world, we will be spending less), it’s just a matter of adjusting the routing of research cost reimbursements across institutions, which is something funding agencies already address continuously.

(I am not advocating that “the rich get richer” — if publication costs go up and they are reimbursed through direct or indirect funding agency payments, institutions aren’t getting richer, they are just being held harmless. I’m not suggesting the Harvards of the world should make a profit by being given more government reimbursement than they need to pay publishing costs!)

Is gold OA bad for under-resourced institutions (e.g., those in the “global south”)?

A variant on the argument that gold OA is bad because authors can’t afford to pay APCs is that it is bad because poor institutions can’t afford to pay APCs. But the point I just made about research-producing institutions demonstrates that generally just the opposite should be true. Under-resourced institutions generally are below average in their ratio of research published to subscriptions obtained. That is, the savings to them on subscription payments should be larger than the APCs they have to pay. (If cost reimbursements are adjusted as I predict, they may not get to keep these savings, but they won’t be made worse off.)

I imagine some will argue that poor institutions, say, in the “global south”, can’t afford either subscriptions or APCs, and should get both for free. OK, that’s a fine policy recommendation, but it doesn’t change the fact that the amount of subsidy they need will be less in a pre-publication payment world (gold OA) than in a post-publication payment world (subscriptions). If publishers, or wealthier nations want to offer subscription subsidies, those subsidies could be provided to cover (the lower total amount of) APCs instead.

Will the transition to gold OA be slow and costly?

Slow? Maybe, though if most research institutions come together behind the Max Planck Society’s Expression of Interest and collaborate to negotiate with the dominant publishers, the tipping point may be near. I don’t see it as any slower than the progress of green OA has been: in fact, since gold OA requires implementation by a modest number of professional organizations (publishers), whereas universal green OA requires implementation by more or less every individual author, I think transition to universal gold is much more feasible than to universal green.

Costly? Maybe. Opponents quickly assert we’ll be paying double while the transition is occurring: paying for all of our subscriptions while publishers still require subscriptions to journals, but also paying APCs for the articles that are published by these journals on an OA basis. This fear is primarily about the so-called “hybrid” path to gold OA: that subscription journals accept and publish a subset of articles OA when the author pays an APC, but that the rest of the content in the journal is only available by subscription. (The journal-by-journal “flip” model has entire journals switching to accept only APC-paid OA articles, and thus eliminating their subscription fees.)

Some advocates for gold OA argue that libraries — especially consortia — will be able to negotiate “offsets”, that is, reducations in subscription payments to offset the amount of revenue the publishers collect in APCs. There has been some progress in this regard, for example in the UK, Austria, and the Netherlands.

I suspect that offsets will only partially cover the costs of transition to a gold OA world. Even where progress is being made, offset savings are lagging behind growing APC payments. And my economic arguments above suggest why offsets are unlikely to fully finance the costs of transition: the dominant publishers have substantial market power, and they are going to use that power to resist the transition to gold OA, trying to make sure we (research-producing institutions) find the transition to be costly.

However, it’s important to recognize that however costly the transition is (and as the consortia demanding gold OA increase in size and experience, offsets will become increasingly helpful), these are transition costs. If the resulting outcomes — open access to scholarly research, and lower prices due to competition — are good for society, then we should be willing to invest something in the transition to get there.

Footnotes:

This article is based on a talk I gave at a recent ACRL Workshop on Scholarly Communications, hosted at UC Berkeley on 15 April 2016.

1. Most of the discussion these days focuses on journals and articles, not monographs. I’m going to write using that terminology. But generally everything I say below applies equally to the economics of monograph publishing, as well.↩

2. Caveat. This is a thought piece. I haven’t had the opportunity yet to do more than casual empirical analysis to back up the empirical claims. So I mention “caveat” above in a few key places where I am making empirical claims that I believe, but which I realize could turn out to be incorrect. I’ve been following these issues long enough to be reasonably certain that there is not compelling empirical evidence to refute my claims, however.↩

3. Yes, I am a university librarian saying that library budgets should be cut if we no longer have to pay subscription fees for scholarly journals. Our goal as a campus library is not to maximize our budget, but to support the research and education mission of the university, and I think both will be better off if we move from libraries paying for subscriptions to authors paying for article processing charges.↩

19 thoughts on “Economic thoughts about “gold” open access”

Excellent, finally an economist we laypersons can pester with our questions 🙂
Thank you very much for weighing in.
I’m the author of the post Mike linked to and I fear a gold OA world may be even worse than what we have now – assuming we only change the business model and everything else remained as it is today: http://bjoern.brembs.net/2016/04/how-gold-open-access-may-make-things-worse
I’ll restrict myself to three questions (for now, lol):

1. One of the most pressing problems for us in the experimental sciences (esp. psychology and biomedicine) is reproducibility. Pressure to publish a lot and in hi-ranking journals has been blamed for much of the unreliability. In particular, the highest ranked journals publish the least reliable experimental science:

Given current political developments, conceivably, the survival of publicly funded science hinges, in no small part, on us being able to make the case that tax-funds are well-spent on reliable science. Can I take from your work here, that you would expect the current hierarchy of journals to survive any such transition? If so, then this would, all else remaining the same, lead to more and more unreliable science being available to the public. Not sure if this is a good thing.

2. In my field, biomedicine, people get hired according to not only the publications the produce, but also to the money they spend: the more grant money I get, the more likely I am to get hired or promoted. Why would we not add the money spent on articles to this money? In my field, it is no big leap to expect the introduction to a candidate to sound like this: “she must be a great scientist, not only did she attract 3 million in competitive grants, she also spent 2 million in competitive publishing!” Nature, for instance, is on the record that it will have to charge ~US$50k (adjusted) per article. Of course, I will get lambasted, if I’m not good enough to keep up in a competitive world, so I have to publish in the “cheap” journals. In other words, being able to spend big bucks is already a sign of competitiveness – would you assume that this would change with journal prices and if so why?

3. As a layperson, I would see APC similar to tuition in that they are paid as a return for prestige. I cannot see any long-term trend of tuition fees decreasing due to the competition between universities for students, but maybe I have the wrong data or the wrong analogy? In particular, I cannot see that Berkeley (Science) brings down the tuition of Harvard (Nature) by competition, or vice versa, but also there I may just be incompetent? (re-reading this, it may come across as a smug statement, but I’m seriously asking!! Sorry for my clumsy English!)

1) No, I don’t see an intrinsic reason for the current journal hierarchy to survive. Moving to producer-pays (such as APC or consortial open-access payments) doesn’t specifically do anything to change that — I’m not claiming it’s a solution for every problem. But I don’t see it creating any new barriers or strengthening the existing journal hierarchy. Some think we shouldn’t do *anything* unless we blow up the current journals. I think that’s a recipe for status quo, because there is no straightforward path to blowing up the current journals (during our lifetimes). We can continue to nibble away, as we have been for 25 years…but gosh, after 25 years of attempting to revolutionize scholarly publishing, the current publishers have only grown stronger while we sit on our hands. If we switch to producer-pays, we get open access right away — big win! And we do *not* increase publisher market power, or barriers to competition from alternative publishers and journals. So bring on all the alternatives — Glossa, PLOS, overlay journals on top of arXiv.org, whatever your fancy is. Flipping the current journals to producer-pays does nothing to stop or slow down the movement to unseat them. But while we’re fighting *that* battle, it creates a sustainable business model for publishing *generally* that provides open access. Win-win.

2) I’m afraid I don’t understand this question. The setup I think I agree with: it makes a lot of sense to add the money for publication to research budgets (taking it away from library budgets for subscriptions). After all, researchers already have to pay to go to conferences to disseminate their research in that manner, and generally get research funding to support conference travel (I know, not enough money for many, but that is a global problem in research — we all think there needs to be more money!). Why not include in their research budgets funds to support publication costs as well as conference costs? The second half of your question I don’t follow though.

3) Oh, but universities *do* compete on tuition. Of course, some charge more than others….but they don’t raise prices to attract better students! Indeed, US universities all have very aggressive scholarship and financial aid programs to compete for top students (and strong students who cannot afford full tuition). Costs of tuition are going up in part because the cost of labor (70% of the input to most universities) is going up, in part because students are demanding more from universities (better dorms, better sports facilities — climbing walls! — more mental health services, more job placement services, etc.), in part because government regulation and compliance requirements are constantly increasing, and — for public universities — because the public subsidies are being drastically cut. But universities pay enormous attention to what their competitors are charging, and work hard to keep tuition as low as they can consistent with their quality class. (Porsches cost more than Ford Fiestas, but the prices of both are constrained by competition from other models in the same quality class.)

It might not be a bad idea to read the rest of what I said below the above rather selective (and out-of-date) quote. In a nutshell: (1) Green OA self-archiving had not caused subscription cancellations then, nor (as far as I know) has it yet done so now. Why would it? Green OA is still too little and too late. (2) But once Green OA is effectively mandated and hence provided globally, subscriptions will become unsustainable and subscription publishers will be forced to cut obsolete products and services, offload all access-provision and archiving onto the global network of Green OA institutional repositories, downsize to just providing peer review alone, and convert to Post-Green Fair Gold (for peer review alone), paid for out of a fraction of the institutional subscription cancellation savings. What we are offered now is Pre-Green Fool’s Gold, vastly inflated in price for obsolete co-bundled inessentials, double-paid (while subscriptions still prevail), double-dipped (if the journal is hybrid subscription/Fool’s-Gold),, unaffordable, unscalable and unsustainable, unnecessary (because Green OA is cost-free), blocking access and progress, and wasting still more time diverting us from the road to the optimal, inevitable and obvious outcome: Post-Green Fair-Gold.
Harnad, S (2014) The only way to make inflated journal subscriptions unsustainable: Mandate Green Open Access. LSE Impact of Social Sciences Blog 4/28 http://blogs.lse.ac.uk/impactofsocialsciences/2014/04/28/inflated-subscriptions-unsustainable-harnad/
Vincent-Lamarre, Philippe, Boivin, Jade, Gargouri, Yassine, Larivière, Vincent and Harnad, Stevan (2016) Estimating Open Access Mandate Effectiveness: I. The MELIBEA Score. Journal of the Association for Information Science and Technology (JASIST) 67 (in press) http://eprints.soton.ac.uk/370203/

Interesting look at the problem. I’m one of the people who believes that Gold OA will not overcome the entrenched market power of the publishers, and here’s why. The scholarly publishing system is not just a communication system, it is also a de facto evaluation system. This is why the Journal Impact Factor remains so resolutely unkillable of course, and we know that researchers evaluate each other based on where they publish. And this applies not just to researchers, but also their employers – the ARWU international rankings specifically awards points to “Papers published in Nature and Science and
Papers indexed in Science Citation Index-expanded and Social Science Citation Index”. There are, as a result, many incentives for authors to publish in the “more prestigious” journals and for their employers to encourage that.

Therefore, in a competitive market as you describe institutions will have an incentive to supplement any APCs that will allow their researchers to publish with the “better” journals – in fact I can see it becoming a inducement to attract or retain staff: “Join us and we will pay any APC that will result in a “good” publication”. So the cost awareness will not have the desired impact, as they will still be shielded from the true cost. The publishers will therefore have an incentive to keep their APCs high, both to maximise profit and to create the appearance of quality. There’s no reason to believe that the perception of “it’s expensive so it must be good” will not apply in this market.

All of this assumes that the big publishers won’t just collude to keep prices high, and thereby drag all prices higher, or that we won’t have more consortia signing up to guarantee publisher incomes to “save” on APCs. Thus far publishers have been pretty awesome at protecting their slice of the pie.

The fun thing about economics is that wrenching organizational changes are “merely” administrative adjustments. But these are typically the chief obstacles to change, where the transition costs are often prohibitive. Then too the problem with using government (funder) mandates to force these changes is that it turns the system into a regulatory regime subject to political influence. We may not want that for scholarly publishing.

There may be an alternative, two-step approach that is less intrusive. First the hybrid journals slowly transition to no subscriptions. Then APC price competition drives the costs down, ending with low cost journals. Flipping is not required.

[Please ignore this comment. I am leaving it only so that I can check the “Email me update” checkbox, which apparently I forgot to do when I wrote my proper comment. I am keen to see what Jeffrey will say in response to that question.]

As you point out, authors having a stake in payments is the best way to get real competition. But it also raises the overall costs to the system. Centralizing payments in libraries (and then consortia) reduces payment processing costs. Distributing payments across all authors at the article level is much more expensive to manage. This could overwhelm the savings from competitive APC pricing.

I don’t think we need to worry too much about that, Dan. First, I’ve already pointed out that we may be able to see savings of 25% from instituting competition: no chance payment processing costs would eat up that much. And there are more efficient ways to manage payments than to have each individual author arrange individual payments for each article. Institutions could set up accounts with publishers, with publishers submitting a quarterly invoice listing all articles. One “check” to write, not dozens. A periodic, fairly quick audit could verify the publisher wasn’t invoicing incorrectly (the agreement could include fines on the publisher if it did invoice incorrectly, giving it the incentive to be accurate). The invoicing would all be handled as part of the publisher’s automated article processing workflow, so trivial cost.

Yes, the institution might then be distributing the charges across the authors research accounts, but institutions do gazillions of transactions like this every day, and processing of this could also be automated, so again, trivial cost.

And there are some pretty sizable transaction costs associated with subscriptions that would be saved, too. For example, each publisher currently has teams constantly monitoring downloads from each subscribing institution, and then working on notifying the institution, and sometimes disabling access, when downloads exceed a certain threshold (to fight piracy). And there’s the huge amount of human labor time spent on negotiating license terms and prices. And on salespeople trying to drum up new subscribers. Etc. These administrative costs would be eliminated by a move to open access.

While offset deals offer the promise of a transition with no additional cost, and while they do protect leaders from being penalized by paying extra longer, it seems they could be more costly in the long run. They are ultimately just another total-spend based big deal where there is no cost transparency at either the journal or APC level; they perpetuate the current inflexibility in adjusting spending to value. While the transition may cost more, wouldn’t it be quicker and also give institutions more control if they paid the APCs and at the same time reduced the cost of their library’s subscription portfolio (perhaps in some way in proportion to APCs paid) based on availability of open access in those journals? It seems that in order to arrive at a reduced total cost resulting from an article-based competitive market, libraries must begin to act during the transition and must be able to act at the journal-title level. They can do that right now by unbundling journal big deals and reducing spending by taking into account current OA availability as well as new document supply options. The publishers’ goal–an indefinite transition to Gold–has much greater chance of success if libraries or their designees a) continue to agree to total-spend deals, and b) continue to ignore the substantial OA already available when they make the expenditure decisions under the subscription model.

I see a big hole in your analysis: How would this system accommodate those in the scholarly communications ecosystem who do not have faculty positions — esp. adjuncts, graduate students? How would they manage to publish without institutional support?

Why do you assume they wouldn’t get institutional support? Their institutions are currently paying for subscriptions for them to read: without paying for subscriptions, could support their APCs. (Heck, universities already heavily subsidize graduate students, no reason they would suddenly see this as a showstopper.)

A very helpful analysis. I’m curious about one point, though; your assertion that subscription/licensing costs are paid primarily through direct/indirect payments from funders to universities. Do you have some background info on that? At the institutions I’ve experience with, the library budget received little or no income from indirects. At my current institution, the primary budget source is state funding. Informal surveys of colleagues indicate much the same at other institutions with very few reporting any significant funding of subscriptions/licenses from indirects. Are there more comprehensive surveys documenting such funding?

At very few public research universities is state funding the primary source anymore, and I’d hazard to guess that at *no* public research universities is state funding paying even close to the cost of education, much less paying for the cost of education *plus* the research engagement of the university.

The 2016 report of the Lincoln Project (sponsored by the American Academy of Arts and Sciences, see https://goo.gl/Es2Lev) is a good place to go for some data. For example, public research universities taken together in 2012 got about 17% of their revenues from state funding, about 25% from federal and other research granting sources, and about 23% from net tuition (Fig 3).

As a general matter, the overhead (“indirect cost”) reimbursement rates federal and other research funding agencies pay are based on an accounting of the overhead costs of the university’s research operations, and library facilities and operation are included in that calculation. See, e.g., for the Univ of California, http://goo.gl/PcZ1oV.

I am a full supporter of your approach. Open Access not only offers free access to research results but also gives the opportunity to set up a real market place for academic publishing. However, new OA licences in the Netherlands and elsewhere apparently seem to miss this opportunity. In that case Open Access will be more expensive than subscriptions ever have been; not only during a short migration period, but permanently. See my article “Open Access or Open Excess?” in Insights. DOI: http://doi.org/10.1629/uksg.231. July 2015.

Very nice article, Leo, thanks for the pointer. I of course agree, some approaches to gold OA are not as sound as others: the key (as you also argue in your article) is to establish a competitive marketplace.

Many thanks for this thoughtful and detailed discussion of Gold-OA flipping. It’s really helpful to have the thoughts of an actual economist on this. Much of what you discuss here has been flapping around in my mind for some time, but in much less solid form. It’s good to see it grounded by some proper expertise.

I myself am very much an open access advocate (a too noisy one, many people would say). Initially, I had a slight preference for Gold over Green, but over the last year or so I have been drawn more Greenward largely due to the arguments that you address in your post: the fear of consolidating the power of existing big publishers, the likelihood of very expensive APCs, and even (as Björn Brembs has pointed out) the possibility of a market where rich researchers can flat-out buy prestige, in the form of $30,000 APCs at Science and Nature. It’s very good to see some of these dangers addressed.

Here is my concern, though. I worry that a global Gold-OA flip, though unquestionably a good thing, might be the good thing that stop us from getting a better thing. Even given that the flip won’t increase the monopoly power of existing publishers — which I accept — it won’t do much to loosen their grip either, whereas (for example) a flip to a preprints-and-post-publication-peer-review ecosystem would much more radically change the power balance, handing control of publication back to scholars and libraries. Isn’t that something worth pushing for?

Similarly, I share your conviction that a Gold-flipped system will be less expensive than the present subscription system — we may end up paying, say, 5 billion dollars a year in APCs rather then the present 10 billion in subscriptions, and that is a big win. But I worry that if we settle on that new local maximum, we may never make the leap to the next and higher peak where the world pays only (say) one billion dollars a year to support its publishing. (A figure which is certainly not impossible to achieve, as several reputable open-access publishers do a very good job at prices around $500.)

So what I am wondering is: do you share my concern that in this case, the good could be the enemy of the best? Or are you more concerned that, in reaching for the best, we could fall short and miss out on the good?

[Darn: I typed up a response to this a couple of days ago but apparently closed my browser window without posting it. Sorry for the delay, Mike.]

Thanks for the kind comments. You definitely put your finger on a key question for *all* policy or pragmatic economics discussions: is the best the enemy of the good, or vice versa?

I’m apparently more optimistic than you that a global gold OA flip will ” do much to loosen [publishers’] grip” — I discussed this in the section “HOW MIGHT GOLD OA REDUCE MARKET POWER?” I think in a fully gold world, in which authors have significant economic incentives (i.e., not the version in which consortia of libraries simply pay all the pre-publication charges with no effect on author budgets), that most (maybe even all) of the monopoly rents will be competed away: that is, in which the research producing enterprise is only paying the “one billion dollars” in your hypothetical.

For that to not be true, the publishers would need to retain a fair bit of market power, and I don’t think they would in this world.

This is a wonderful piece, thank you. I wonder if I could ask you to evaluate one OA model that you haven’t mentioned, Freemium OA. Under this model, the article (or book) is made available, for free in a basic (usually read-only) form and premium services are sold around the content (e.g. Ability to download, store, print, copy-paste etc). Unlike other models of OA which remove economic leverage on the reader-side (if it’s free, where is the market signal to improve reader-facing services?), Freemium forces the publisher invest in and improve reader-facing services because only a proportion of the audience/institutions will upgrade to the premium edition. Therefore, to survive, a Freemium OA publisher must win a very large total audience and remain audience-focused. I believe Freemium would be more effective at removing the two main problems of today’s subscription model (curtailing access to knowledge and excessive profit margins) than either Green or Gold. It also has a very short implementation pathway involving just one actor – the publisher (athough, since it will reduce margins I can see the challenge in making it happen!). To date, I only know of two scholarly publishers using this model, Open Editions and ourselves (OECD Publications) and it seems to be working for each of us. If you would have a moment to consider its merits via-a-vis Green and Gold, I’d appreciate it very much.

I haven’t thought much about the freemium model yet, so don’t hold me to my initial reaction. It’s not immediately obvious that it’s much different than green OA (except that the publishers are hosting the open access servers), plus value-added (for a fee) services. I’m all for offering some value-added services for a fee…if those services are competitive (that is, there are multiple firms that can offer them). But if they are tied to copyrighted content, then they are provided by a monopolist over that content, and I would expect that we’d still be facing monopoly rent-taking and scholarly communications would continue to cost much more than it should. (OECD may not be acting like a monopolist, or have that much market power, but Elsevier?) Also not clear (as you intimate) what market incentives would drive publishers to switch to a freemium model.